UAE Residents Become Saving-Savvy

The global financial meltdown has triggered enormous repercussions in all industries as companies struggle to break even and individuals are left neck-deep in debt.

Investors flocked to the UAE, plunging money into various assets and investment schemes designed to pay out high returns.

However, this is all changing. Jacques Bernard, Chief Investment Officer, National Bonds, talked to Gulf News about the increase of savings rates and why it's time for the transparency issue to stop casting its shadow over the Gulf.

Gulf News: What about future investment plans for National Bonds? Do you think you might move away from say, real estate and move into other sectors that you perhaps haven't considered before?

Jacques Bernard:Yes, so far the sectors we've considered and invested in are education, retail - retail being food - Islamic insurance and we'll continue to look at opportunities in healthcare because I think those are critical.

The bulk of our investments are in the UAE and we have a mission to give back to the community, basically to develop the UAE and where we feel there's a need.

We'll try to fill the gap if the numbers actually do come together. And also it makes a lot of economic sense if there's a need, it's usually a very profitable kind of venture.

Dubai has admitted that the quality of healthcare facilities in the UAE is quite low compared with other regions, so it seems the potential market for healthcare is huge.

Yes, there's a huge market but there are so many sectors and sub-sectors in healthcare that you need to take a look at what your investment entails. Some are very speciality-driven, some are very primary healthcare which is more what we are looking at.

Primary healthcare is the mother taking her child...so the basic needs. And I think as well, which is interesting now, healthcare is more decentralised, especially in Dubai. You have this Healthcare City which is more of a speciality-driven centre as opposed to a primary healthcare being closer to their residents.

And you're even starting to see hospitals in Dubai such as a Saudi-German hospital which is a good thing, as it has the emergency units and so forth.

And so healthcare is something we're looking at but again we'll need to see the numbers and see if the numbers are valid.

Is it possible to put a figure on the future investments that you're starting?

Not really. The thing is the most predictable investments that we have are short-term investments.

Basically we invest bulk in Saudi deposits, Sharia instruments, murabaha, that's kind of predictable but private equity, it could come about or it could not come about.

You see a lot of private equity firms raising a lot of money and then actually having trouble investing it because there's a lot of possibilities and few winners so I wouldn't be able to give any number as to our investment in healthcare. It could be significant or it could be nothing.

Whereas now you are very focused on the UAE, do you have plans to go abroad?

In terms of investment, not really. We are UAE-based, a lot of opportunities still exist in the UAE especially, I would call it the yield and the income side of the business, which is sukuk which is also the money market returns. Money market returns in the UAE are much higher than those of the US.

We don't rule out going abroad but not in the immediate future.

Considering the financial situation, do you think people will be more likely to invest in more secure assets like bonds or even gold as opposed to other assets, such as real estate which they can lose out on?

Yes, definitely. I think we distinguish between investments and savings and I think people are coming about in terms of understanding the difference now.

It's not an investment if you actually are using the house and living in it, that could almost be considered a saving scheme because obviously should the market shrink, you increase your capital and avoid basically paying rent.

And it's not just in the UAE that saving schemes are popular.

There is a worldwide soaring of saving rates and what's interesting is the countries that were most affected by the crisis are those where the savings rates are shooting through the roof.

To name two, one is Spain where the savings rate is going to be reaching 30 per cent in 2010 because of the real estate crisis. Of all the European countries, they were, with the UK, the ones that suffered the most.

And if you actually take a look at the US they went from a savings rate of zero and they're predicted to actually obtain five. Now five is still low but five is fivefold. So I think the savings is something that is on the rise, it's global and we see it in the UAE.

So how does the UAE rate then in terms of saving? Do people generally save here or is it something that will grow?

Well it's very obvious that in the past, everything was geared at spending and investing. And now we've reversed that culture.

But there's no numbers published on savings rates for the UAE. But what we're witnessing clearly is that the trend is towards savings and hopefully that will continue.

Will people move away from real estate and into say, gold and savings?

Well I would still consider gold not as a savings. It's an investment that is so bearish that by definition if things do recover you might actually see a big drop in gold price so I don't consider savings in gold to be equal.

It's been predicted that there's going to be an exodus of expats from the country this summer. Do you believe this and will it affect business?

Well our business is different. We do of course have expat clients but our Emirati clients is overwhelming in terms of proportion. Now it's hard to comment on expat flow as we don't know, people are coming in, people are going out, people coming in with visas.

We're in a different situation than most institutions because you have to bear in mind we're a savings institution. We're not a bank with credit cards, liabilities. So I can't say so far we'll be affected if the event has occurred.
Fact file

hat is National bonds? A private joint stock shareholding company, National Bonds Corporation was launched in March 2006.

The Government of Dubai holds a 50 per cent ownership in the company with each of its shareholders, comprising Dubai Bank, Dubai Holding and Emaar Properties, holding 16.6 per cent ownership respectively.

National Bonds Corporation is Sharia compliant, with a dedicated Sharia Board to oversee all financial aspects, including product-related operations and investments.

In December 2006, National Bonds Corporation launched property development projects - "Skycourts," the elegant and affordable freehold residential community in the heart of Dubailand, and Flamingo Creek in the Lagoons.

In 2007, National Bonds Corporation launched National Properties, a wholly-owned, full-service real estate subsidiary that offers distinctive homes and lifestyle options to the multinational UAE community.

National Bonds Corporation has invested in Taaleem PJSC, an initiative aimed at raising quality standards in the region's education sector.

It is the new brand for Beacon Education that aims to inspire young minds, and help them identify and develop their passions and talents.

National Bonds Corporation has also invested in BCS, a Strata Management company specialising in property management, Souk Extra the retail community shopping chain, and in M'sharie, the private equity arm of Dubai Investments.

National Bonds is the National Saving Scheme of the UAE that provides UAE nationals, residents and non-residents over the age of 16 with a credible, safe and Sharia-compliant savings opportunity.

Minors can also own National Bonds, provided the bonds are purchased by the parent/guardian. Each bond costs Dh10, with a minimum purchase of Dh100; National Bonds can be purchased from nearly 500 outlets across the UAE, including exchange houses and banks.

These include Emirates Islamic Bank, Dubai Islamic Bank, Sharjah Islamic Bank, Dubai Bank , Al Hilal bank and exchange houses: Al Ansari, Al Fardan, Al Ghurair, Redha Al Ansari, Al Rostamani International, UAE, Wall Street, Lari, Orient, Al Razouki International, Sharaf and Habib Exchange Company.

National Bonds can also be purchased online at www.nationalbonds.ae or call toll free 800-BONDS (26637). National Bonds awards 101 prizes every week, of amounts ranging between Dh1 million, Dh10,000, Dh5,000, Dh1,000 and Dh500.

This amounts to an impressive Dh1,155,000 in total prize money awarded each week. The programme is based on the Islamic principle of Mudaraba, whereby at the end of the financial year 20 per cent of the profits made by the National Bonds Corporation will be distributed among bondholders.


From Gulf News